Puerto Rico Gov. Alejandro García-Padilla announced Monday a multi-pronged plan to address the island’s fiscal crisis to work with creditors on restructuring what he described as the “unpayable” $73 billion debt.
During a televised speech, García-Padilla said a group — comprised of Chief of Staff Víctor Suárez, Government Development Bank President Melba Acosta, Justice Secretary César Miranda, Senate President Eduardo Bhatia and House Speaker Jaime Perelló — will be tasked with striking up “conversations to achieve, with transparency and consensus, the restructuring of our public debt.”
“The ultimate goal is a negotiated agreement with bondholders for a deferrment of payments on the debt for a number of years so that the money can be invested here in Puerto Rico,” he said.
“We are not restructuring the debt in a vacuum. All the measures we have taken in the last two years reflect our willingness to pay and, had we not taken them, we would not be in a position today to request restructuring,” he said.
“We have done all that was within our power, but, as the report makes clear, the next step must be to ensure more favorable terms for the repayment of our debt,” he said, referring to a report released Monday produced by former IMF economists the government commissioned to analyze the government’s fiscal situation and offer suggestions to get the island back on track.
García-Padilla spoke after a group of panelists, headed by Anne Kreuger, who co-authored the report, presented it to a broad sector of public and private sector participants, as well as lawmakers from the New Progressive Party and the Popular Democratic Party at the Puerto Rico Convention Center.
The 26-page report suggested, among other things, that to restore competitiveness, Puerto Rico requires profound structural and fiscal reforms, as well as a restructuring of its public debt. Furthermore, the report confirmed Puerto Rico needs to restore its institutional credibility by overcoming a legacy of weak budget execution and lack of transparency in its data.
“This is a daunting agenda politically, legally, and organizationally. It is also an urgent one: the government’s cash balances can evaporate in the face of delays, reducing the room for maneuver and intensifying the crisis,” the report stated.
In his speech, García-Padilla said Puerto Rico needs “a plan of restructuring and development that is comprehensive and complete, attends to, in the long and not the short term, in definitive fashion the immense problem we face today.”
“If this is not achieved, the option is the unplanned and unilateral default of our obligations, with all the negative consequences that this implies for each and every one of us. We must act now, for that not to happen,” he said.
To promote economic growth, the governor said he will enact more fiscal reforms, if necessary and promote local legislation to make “laws more competitive and align them to the reality of today so they will promote job creation with a major expansion of the private sector.”
“I will lobby at the federal level for a reform of the current welfare system, which together will create the conditions for employers and investors to hire more employees, and for work in Puerto Rico to be more lucrative than simply receiving public assistance,” he said.
The board will be in charge with the task of preparing, in coordination with the legislative branch, a long term fiscal agenda geared toward:
- Establishing the parameters for a five-year fiscal plan;
- Proposing additional cuts in spending — including cuts in some services — to avoid an increase in taxes;
- Restructuring the Treasury Department to increase the efficiency in revenue collections;
- Promoting alliances with the private sector to provide some of the services that are provided by the public sector;
- Radically changing the way in which government finances and economic statistics are addressed, to establish greater transparency and credibility;
- Guaranteeing our citizens essential services and our pensioners a just income; and,
- Creating a Fiscal Board that, outside political considerations, will guarantee the continuity and honor of the commitments agreed upon by the García-Padilla administration during the restructuring process. This board must carry out its responsibilities in an uninterrupted fashion and outside of electoral cycles.
Pierluisi: ‘It’s time to act’
Puerto Rico’s Resident Commissioner in Washington, Pedro Pierluisi, said the time has come to take action.
“It’s time for this administration to assume its responsibility of the situation we face and, in large part, has been exacerbated by them,” he said. “While it is true that all administrations carry different degrees of responsibility, Puerto Rico had never before been in such a devastating crisis.”
He called for acting with “seriousness and maturity and leaving behind the bad habit of blaming and looking the other way when things don’t go well.”
Pierluisi, who heads the opposing NPP political delegation, confirmed his avaialbility to work with the administration on “ideas and solutions” to address the island’s issues.
“I offer my experience and skills, and relationships that I have developed in the federal capital to work for the sake of Puerto Rico,” said Pierluisi, who has spent the better part of the last six months heading a bi-partisan effort to get federal legislation approved to extend the applicability of the U.S. Bankruptcy Code’s Chapter 9 clause to Puerto Rico.
With that change, Puerto Rico would be able to seek bankruptcy protection for its troubled public corporations, paving the way for orderly, court-supervised restructuring of its debt. That bill is still under consideration in Congress.